A Transformed Investor’s Story

For more than 35 years, Dimensional global firms* have been putting financial science to work for investors by translating compelling research into real-world investment solutions.

01

An enduring belief in the

Power of Markets

Capital Markets Have Rewarded
Long-Term Investors

Growth of $1 USD, Jan. 1970–Dec. 2017

For illustrative purposes only. Indices are not available for direct investment, therefore their performance does not reflect the expenses associated with the management of an actual portfolio.

Past performance is not a guarantee of future results. Performance may increase or decrease as a result of currency fluctuations.

Source reference: In US dollars. World Equities is the MSCI World Index (gross div.). US Inflation is measured as changes in the US Consumer Price Index. US Consumer Price Index data is provided by the US Department of Labor Bureau of Labor Statistics. Treasury Bills is the IA SBBI US 30 Day TBill TR USD, provided by Ibbotson Associates via Morningstar Direct. Long-Term Government Bonds is the IA SBBI US LT Govt TR USD, provided by Ibbotson Associates via Morningstar Direct. MSCI World Index data provided by MSCI.

At Dimensional, our investment approach is based on a belief in markets.

Rather than relying on futile forecasting or trying to outguess others, we draw information about expected returns from the market itself—letting the collective knowledge of its millions of buyers and sellers set security prices.

Letting markets do what they do best—drive information into prices—frees us to spend time where we believe we have an advantage, namely in how we interpret the research, how we design and manage portfolios, and how we service our clients. It means we take a less subjective, more systematic approach to investing—an approach we can implement consistently and investors can understand and stick with, even in challenging market environments.

Embrace Market Pricing

The market is an effective information-processing machine. Each day, the world equity markets process billions of dollars in trades between buyers and sellers—and the real-time information they bring helps set prices.

In US dollars. Source: Dimensional, using data from Bloomberg LP. Includes primary and secondary exchange trading volume globally for equities. ETFs and funds are excluded. Daily averages were computed by calculating the trading volume of each stock daily as the closing price multiplied by shares traded that day. All such trading volume is summed up and divided by 252 as an approximate number of annual trading days.

David Booth

Founder and Executive Chairman

“The number of managers that can successfully pick stocks are fewer than you’d expect by chance. So, why even play that game? You don’t need to.”

David Booth

Founder and Executive Chairman

02

Applying insights from

FINANCIAL SCIENCE

Breakthroughs in Modern Finance

1966Efficient Market Hypothesis

Efficient Market Hypothesis

Eugene Fama
Nobel laureate, 2013
Professor, University of Chicago

Eugene Fama’s efficient market hypothesis marks a pivotal moment for modern finance. The essence of the argument can be described by the simple statement that security prices reflect all available information.

1973Intertemporal CAPM

Intertemporal CAPM

Robert Merton
Nobel laureate, 1997
Professor, MIT

The ICAPM set up a theoretical framework for how multiple sources of risk could arise. It expanded on the one-period CAPM model where the only priced risk was market beta.

Robert Merton
Nobel laureate, 1997
Professor, MIT

1981Small Cap Investing

Small Cap Investing

Dimensional Fund Advisors
David Booth, Founder
and Executive Chairman

Dimensional pioneers small cap investing with the launch of its first strategy, which offers investors diversified, efficient access to small company stocks.

Dimensional’s Research and Investment teams draw insight from academia, but what sets us apart is how we interpret, test and apply that research to practical investment solutions for our clients.

Tomorrow

...

Dimensional was built around a set of ideas bigger than the firm itself. With a confidence in markets, deep connections to the academic community and a focus on implementation, we go where the science leads, and continue to pursue new insights, both large and small, that can benefit our clients.

Eugene Fama and Kenneth French are members of the Board of Directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP. Robert Merton and Robert Novy-Marx provide consulting services to Dimensional Fund Advisors LP.

Dimensional’s investment approach is grounded in economic theory and backed by decades of empirical research.

Our internal team of researchers works closely with leading financial economists to better understand where returns come from.

Research has shown that securities that offer higher expected returns share certain characteristics, which we call dimensions. To be considered a dimension, these characteristics must be sensible, persistent over time, pervasive across markets and cost-effective to capture.

Understanding what drives returns is the starting point. From here, we focus on fine-tuning our method of capturing them.

We structure broadly diversified portfolios that emphasise the dimensions of higher expected returns, while addressing the tradeoffs that arise when executing portfolios.

Every day our portfolio managers and traders seek to balance costs against expected returns and diversification. We work for the slightest expected gain, as every incremental improvement can add up over time.

“The nuance and expertise is where you take knowledge and information and implement it in a real test, not in the backtest.”

Gerard O'Reilly

Co-Chief Executive Officer and Chief Investment Officer

A Foundation Built on Great Ideas

03

A commitment

TO OUR CLIENTS

The Global Financial Crisis and Its Aftermath

A key to a good long-term investment experience is being able to stay with your investment philosophy, even during tough times. During the rocky 2008–2012 period, many investors sold their equity funds. Within the Dimensional Global Firms*, equity funds had inflows throughout the period, which could suggest that in aggregate investors were prepared to withstand the market’s movements in order to pursue long-term results.

For illustrative purposes only. Tracking a USD $100 investment in global equities (MSCI World Index) to illustrate the uncertainty in markets. Indices are not available for direct investment, therefore their performance does not reflect the expenses associated with the management of an actual portfolio.

Past performance is not a guarantee of future results. Performance may increase or decrease as a result of currency fluctuations.

Source reference: In USD. MSCI World Index data provided by MSCI.

Dimensional Global Equity Flows include flows from all Dimensional commingled funds with the exception of Balanced, Target Date and Fixed Income funds. A flow is any trade that is a purchase sell, exchange purchase, exchange sell, dividend, long-term capital gain or short-term capital gain. This excludes any flows from other DFA mutual funds. Each flow is converted to USD on the trade date using WM Reuters London Close FX rates.

Dimensional Investing is about providing a successful investment experience.

That means more than considering investment returns. It means offering peace of mind knowing that a transparent approach backed by decades of research is powering every decision.

Markets go up and they go down. The goal of Dimensional Investing is to help people be prepared, so they can stick with their plan.

Institutional Investor’s2016 Money Masters†

DAVE BUTLER

Co-Chief Executive Officer and Head of Global Financial Advisor Services

“The client experience has always been, and will continue to be, why we do what we do.”

DAVE BUTLER

Co-Chief Executive Officer and Head of Global Financial Advisor Services

Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.

DFAL does not give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision. Please read the ‘Important Information’.

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This material is provided for information purposes use only. It does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Any entity responsible for forwarding this material to other parties takes responsibility for ensuring compliance with all financial promotion laws, rules and regulations. It is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material have been obtained or derived from sources believed by DFAL to be reliable, but DFAL makes no representation as to their accuracy or completeness. DFAL has reasonable grounds to believe that all factual information herein is true as at the date of this document. DFAL accepts no liability for loss arising from the use of this material.

None of the other Dimensional Global Firms are currently licensed by, registered with, or supervised by the Financial Conduct Authority.

† The information provided is not intended to provide a sufficient basis on which to make an investment decision.

Eugene Fama, Kenneth French, Robert Merton, and Robert Novy-Marx provide consulting services to an affiliate of Dimensional Fund Advisors Ltd. Eugene Fama and Kenneth French also serve on the board of directors of an affiliate of Dimensional Fund Advisors Ltd.